Endesa Brasil has agreed to ensure that its existing and future projects will comply with the environmental and social requirements - the host country laws and regulations and the IFC environment and social Performance Standards. The information about how this will be addressed by Endesa Brasil is summarized in the paragraphs that follow.
>> Environmental and Social Management Framework and Capacity
Endesa has recently simplified the structure of its operations in Brazil by consolidating its holdings under Endesa Brasil. The new structure of Endesa Brasil has been in effect at a practical level since October 2005. Based on meetings with Endesa’s environmental manager, presentations made during appraisal, and subsequent conversations, the transition of the environmental and social organization is in progress and proceeding well. Endesa’s hydro expertise is in Chile, so it is likely that Santiago will have a continuing role. Endesa’s environmental manager in Rio de Janeiro is informed and capable, as was environmental staff met at operating companies during appraisal. Endesa has the component pieces in its various operations in Latin America, and it is expected that revised staff roles together with cooperative agreements between operating units can provide necessary capacity and organization.
>> Performance of Existing Subsidiaries
Endesa Brasil’s subsidiaries include distribution companies Ampla and Coelce, transmission company CIEN, hydroelectric generation station Cachoeira Dourada, and the TermoFortaleza thermoelectric plant.
Ampla –The company was privatized in 1996, and Endesa, now the controlling shareholder, has been an investor since privatization. Post-privatization environmental corrective actions have been completed and activities now are focused on environmental and efficiency improvements and social programs.
Ampla serves 73% of the state of Rio de Janeiro, but not the city of Rio de Janeiro. The service area is relatively urbanized and about 40% of customers are low income. Ampla has good experience with payment by billed customers (99% of energy billed is paid), but has a problem with energy theft (commercial losses were over 13%). In response, the company has developed what it calls the Rede Ampla program, which combines network reconfiguring to physically prevent tampering and theft together with a customer education program. Ampla focused on the most problematic districts to identify losses by geographic zone and type of client. Initial results have been favorable, and Endesa plans to extend the program to other service areas within Ampla (additional 400,000 customers by 2007) and to Coelce as well.
Typical of distribution companies, Ampla has a variety of environmental and social development programs that it supports in its service area. Ampla’s operations are consistent with IFC’s environmental and social requirements.
Ampla owned nine older, small hydroelectric plants, with a total installed capacity of 62.26 MW. These were sold to a third party in December 2005 as was required by the New Industry Model Law.
Coelce – The company was privatized in 1998, and has been operated since then by Endesa. Similarly to Ampla, operations at Coelce are in a mature post-privatization stage. Coelce is based in Fortaleza and serves all of Ceará state. Except for the city of Fortaleza and coastal communities the service area is largely rural. The company has recently concluded a 5-year program to improve worker safety, especially safety practices by subcontractors. The company does not have a significant problem with energy theft or public safety and total losses are about 14%. Coelce expected to be OHSAS 18001 certified for its health and safety program in January 2006 and is preparing for ISO 14001 certification for its environmental management program. Coelce’s operations are consistent with IFC’s environmental and social requirements.
Coelce supports a variety of environmental and social programs, including a project to enhance vegetation in rights of way, increased energy efficiency in the Jaguaribe-Apode irrigation district, environmental education programs in public schools, and a waste management plan.
CIEN – CIEN operates the two electrical interconnections between Argentina and Brazil, each with a capacity of 1,100 MW. The two interconnections were constructed as greenfield projects by Endesa in 2000 and 2002, respectively. Endesa indicates that about 900 properties were affected by construction of each of the interconnections, and the second interconnection requiring the relocation of 52 buildings. An independent monitor for the project lenders oversees the mitigation program. Mitigation includes a reforestation program in Rio Grande do Sul state and a migratory bird monitoring program. CIEN’s operations are consistent with IFC’s environmental and social requirements.
Endesa Cachoeira –The Cachoeira Dourada hydroelectric plant is located on the Rio Paranaíba, which forms the border between the states of Goias and Minas Gerais. It has ten generating units (a planned 11th unit will not be built) with a combined capacity of 658 MW, which came into operation over the period 1958 through 1994. It was privatized in 1997 with a 30 year concession. Although its dam is 23 m in height and its reservoir is 74 km2 in area, Cachoeira Dourada operates as a run-of-river plant whose generation is linked to water releases from the 2,100 MW Itumbiara hydro plant immediately upstream.
The dam was raised 1 m for the fourth phase in the mid-1990s, prior to privatization. A pre-purchase stability audit of the dam was prepared by Duke Energy. The dam is extensively instrumented, and all data is monitored by Endesa Chile. These actions meet the requirements of IFC’s OP 4.37 on dam safety for an existing dam, as a full inspection was performed and an effective dam safety program is in place.
The Rio Paranaíba, drains to the southwest and joins the Rio Paraná, which forms a border between Argentina and Paraguay and ultimately drains to the Rió de la Plata, which is a border between Argentina and Uruguay. Thus the Rio Paranaíba is an international waterway according to IFC’s OP 7.50. However, the project is an ongoing scheme and is exempt from notification requirements of the policy.
The project was required by IBAMA, the national environmental agency, to obtain new environmental approvals following privatization in a process for the re-licensing of existing assets. The process took several years to accomplish (1998 – 2004) and required a regional environmental study. Comprehensive environmental monitoring is required, which is reviewed by Endesa Chile. The analyses did not result in any significant operational changes at the plant.
IBAMA required that Endesa commit 0.5% of the purchase cost to environmental conservation. Endesa has a reforestation program developed in partnership with landowners at the margins of the reservoir, and funded a land use study of the reservoir margins. A fish ladder was studied earlier and found not to be required; however, IBAMA has requested Endesa to investigate a fish re-introduction program.
Endesa personnel indicate that there are no significant ongoing environmental or social issues at the plant. Future activities at the plant will focus on maintenance and efficiency improvements, and no changes to the reservoir size, operation, etc. are anticipated. Cachoeira Dourada has ISO 14001 and OHSAS 18001 certification, and has a full time environmental manager and technicians onsite.
Endesa Fortaleza – TermoFortaleza is a natural gas-fired combined-cycle power plant located on a 7 ha site in the Pecém Industrial and Port Complex in Caucaia, state of Ceará. It is close to the Guamaré-Pecém gas pipeline (which brings gas from Rio Grande do Norte state to Ceará) and about 2 km away from the 230 kV Cauipe substation of CHESF. The plant has been in operation since December 2003. IFC is separately investing in the TermoFortaleza plant.
An issue has been the security of gas supply. The environmental and social impacts of planned upgrades to the Guamaré-Pecém gas pipeline (to provide sufficient gas for TermoFortaleza) were a concern at the time of IFC’s earlier appraisal. However, these upgrades will no longer be required as Petrobrás is in the process of constructing another pipeline in northeastern Brazil (Mossoro-Pecem) that will alleviate this constraint and any related environmental or social concerns.
Another issue identified for follow-up is the four families who live adjacent to the southern boundary of the plant. The short transmission line connecting the plant to the grid passes proximate to these houses. The families (all related) have lived on the property for many years with the permission of the former owner. Endesa, which now owns the property, is developing a resettlement plot in the corner of the property farthest from the plant and transmission line. Four lots have been established, each 50 m by 250 m, and a 30 m2 house will be constructed on each lot. The program was developed in consultation with the residents, and includes follow-up by social workers and a livelihood program for farming.
TermoFortaleza has a dry low NOx combustion system to control emissions of nitrogen oxides. NOx emissions were guaranteed by the manufacturer to not exceed 25 ppmv, and actual emissions are about 17 to 18 ppmv. Stack emissions are continuously monitored. Noise levels measured at the plant fence line meet the guarantee of 60 dB(A).
In 2005, the plant began the process leading to certification of its environmental and health and safety management systems, and expects to be ISO 14001 certified by June 2006 and OHSAS 18001 certified by December 2006. On conclusion of the resettlement program, TermoFortaleza’s operations will be consistent with IFC’s environmental and social requirements.
>> Going Forward
IFC is satisfied that Endesa Brasil will have the capacity to undertake projects in a manner that is consistent with the IFC Performance Standards. Regarding new hydroelectric projects of the size envisioned (up to about 350 MW), Endesa (through Endesa Chile) is an experienced developer of hydro projects in this size range, and is familiar with IFC’s requirements. Brazil’s environmental and social permitting requirements and procedures for hydroelectric plants, including public consultation, substantially meet IFC’s requirements. Endesa Brasil has experience in acquisition of existing facilities (hydro plants and distribution companies); a pre-purchase audit of environmental and social conditions and dam safety should suffice. Loss reduction programs can problematic if not handled with care and cultural awareness. Ampla is currently implementing such a program successfully in a low income, urban setting, and would appear to have the awareness and capacity to extend the program to other locations in Brazil. Renewable energy projects such as wind and solar have issues different from thermal and large hydro generation. The small scale of Endesa’s planned ventures (30 MW) can be handled by existing staff supplemented by specialized consultants.
As part of IFC’s investment, Endesa Brasil will take the following actions:
-- Specifically adopt IFC’s new Performance Standards as applicable to all of its operations;
-- Send one person from its staff and one person from Endesa Chile to IFC sponsored training on implementation of the Performance Standards;
-- Employ outside technical, environmental, and social experts to monitor the design, construction, and initial operation of all new-build plants in which it invests;
-- Conduct pre-purchase environmental, social, and occupational and community safety audits (as appropriate to the asset) for any existing facilities in which it invests; and
-- Provide to IFC an annual environmental monitoring report, in a mutually-agreed format, summarizing the environmental and social performance of the company together with summaries of environmental and social due diligence reviews undertaken of potential new investment programs.
